Should You Consider Adding Invesco S&P SmallCap Momentum ETF (XSMO) to Your Investment Watchlist?

Overview of the Invesco S&P SmallCap Momentum ETF (XSMO)

The Invesco S&P SmallCap Momentum ETF (XSMO) began trading on March 3, 2005. This passively managed exchange-traded fund aims to provide investors with broad access to the U.S. small-cap growth equity market segment.

Managed by Invesco, the fund has accumulated over $2.29 billion in assets, positioning it among the larger ETFs focused on small-cap growth stocks in the United States.

The Appeal of Small Cap Growth Stocks

Investing in small-cap companies can offer significant growth opportunities, but these firms—typically valued at under $2 billion—also carry heightened risk.

Growth stocks are characterized by above-average increases in sales and earnings. While they often outpace the broader market in terms of growth, they also tend to have higher valuations and experience greater price volatility. Although growth stocks may outperform value stocks during strong bull markets, value stocks have historically delivered more consistent returns across various market conditions.

Expense Ratio and Yield

When evaluating ETFs, the expense ratio is a key factor, as lower costs can lead to better long-term returns if other factors remain constant.

XSMO has an annual expense ratio of 0.36%, which is comparable to similar funds in its category.

The ETF offers a trailing 12-month dividend yield of 0.71%.

Portfolio Composition and Leading Holdings

Before investing in any ETF, it's wise to review its holdings, even though these funds offer diversification that helps reduce the risk associated with individual stocks. Most ETFs, including XSMO, provide daily transparency of their portfolios.

Within XSMO, the Industrials sector represents the largest allocation at approximately 28.2%. Information Technology and Financials are also among the top sectors in the portfolio.

Key holdings include Interdigital Inc (IDCC), which makes up about 3.99% of assets, followed by Brinker International Inc (EAT) and Armstrong World Industries Inc (AWI).

The fund’s top 10 holdings collectively account for roughly 25.97% of its total assets.

Performance and Risk Metrics

XSMO is designed to track the S&P SmallCap 600 Momentum Index, which selects securities with strong growth characteristics from the Russell 2000 Index.

Year-to-date, the ETF has gained about 6.01%, and over the past year (as of 03/09/2026), it has risen approximately 23.8%. During the last 52 weeks, its share price has ranged from $55.15 to $80.79.

With a beta of 1.05 and a three-year standard deviation of 20.77%, XSMO offers exposure to about 113 different companies, helping to spread out company-specific risk.

Other ETF Options to Consider

XSMO holds a Zacks ETF Rank of 3 (Hold), reflecting factors such as expected returns, expenses, and momentum. It can be a suitable choice for investors interested in the small-cap growth segment, but there are alternative ETFs in this space as well.

Comparable funds include the iShares Russell 2000 Growth ETF (IWO), which manages $12.46 billion in assets, and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK), with $20.38 billion in assets. IWO has an expense ratio of 0.24%, while VBK’s is just 0.05%.

Summary

Passively managed ETFs like XSMO are increasingly favored by both individual and institutional investors due to their low fees, transparency, flexibility, and tax advantages. They are particularly well-suited for those with a long-term investment horizon.